Thread: why did EUR/JPY drop during NFP?

I have been GBP/USD EUR/USD and EUR/JPY since the london open and experimented with a trading thought now. I wasn't aware that NFP was coming this noon GMT. Luckily I was of my transactions, although the action actually scared me and I got out as soon as I could. Although I won't trade news, I have realised the risk of not paying attention to it. I browsed through the news and kind of understood EUR and GBP climbed so much, but I am still puzzled by the sudden drop of EUR/JPY. So far as I know, EUR/JPY's action has been parallel to that of EUR/USD. Did they behave so differently tonight? Could somebody please shed some light?

Perhaps people receiving their straight back from the Dollar after the bad US news. USDJPY fell than EURJPY.

A dollar reinforces the Yen on Yen pairs. You'll observe that the GBP/JPY dropped. A weak jobs number, broadly speaking, lessens the quantity of exports from Japan and makes US consumers have money. The economy of japan depends on a export industry.

Originally Posted by ;

the activity of EUR/JPY has been quite parallel to that of EUR/USD. Did they behave so differently ? Could somebody please shed some light?

You're enrolled here because Feb 2006, did you make any transactions because then or you just like to watch the forum?

USD/JPY principles the others JPY pairs, and here is the actual reason why!

When USD/JPY drops, the least it can occur is another pairs drop just a little bit slower due to the support of another pairs like EU and GU pushing up in this circumstance.

However its all about the amount...


Should you notice... the pips of EU or GU are below 1 thousandth of 1

Instance 0.0001

The pips on UJ are in on hundredth of 1....

Example 0.01

A few notice this, but its important....

What this means is that UJ pips are more stronger than the others despite we earn almost the exact same.

Considering EJ = EU * UJ.... This 0.01 * 0.0001 will have a influence on the final number. 0.01 will rule as it is a larger number.

Be well!

Originally Posted by ;

What this means is that UJ pips are more powerful than others despite we get almost exactly the same.

Since EJ = EU * UJ.... That 0.01 * 0.0001 will have a influence on the last number. 0.01 will rule since it is a larger number.

Sorry, if a pip is 0.01 or 0.0001 doesn't make any difference .

The chief reason is that bad NFP numbers showed that US market is weak, and the stockmarkets dropped around the world. EUR/JPY is a carry trade pair, and carry trades are generally strongly correlated with stock markets. So EUR/JPY and GBP/JPY both dropped after NFP.

It appears that carry trades are used not just for profiting from the interest rate differential between low and high yielding currencies, but also yen are borrowed, also converted to EUR or GBP to buy stock. So when is a sell-off at the stock market, the yen is purchased back, thus the strengthening.

Originally Posted by ;

Sorry, whether a pip is 0.01 or 0.0001 doesn't make any difference .

The main rationale is that bad NFP numbers revealed that US economy is weak, and the stockmarkets dropped around the world. EUR/JPY is a carry trade pair, and carry trades are generally closely connected with stock markets. So EUR/JPY and GBP/JPY both dropped closely after NFP.

It seems that carry trades are used not just for profiting from your interest rate differential between low and high yielding currencies, but additionally yen are borrowed, and converted to EUR or GBP to buy stock. So when is a sell-off at the stock market, the yen is bought back, thus the strengthening.

Great explanation...I was about to say the Exact Same thing

Originally Posted by ;

You're enrolled here because Feb 2006, did you make any transactions because you simply like to observe the forum?

USD/JPY rules the others JPY pairs, and here is the real reason why!

If USD/JPY falls, the least it can occur is another pairs drop just a little bit slower due to the support of another pairs such as EU and GU pushing up in such a case.

But its all about the number...


If you notice... the pips of EU or GU are below 1 thousandth of 1

Instance 0.0001

The pips on UJ are in on hundredth of 1....

Example 0.01

A few notice this, but its significant....

This means is that UJ pips are more stronger than the others despite we earn almost the same.

Since EJ = EU * UJ.... That 0.01 * 0.0001 will have a impact on the last number. 0.01 will rule since it's a larger number.

Be well!

Thx Warper...

I noticed today that ALL Yen pairs fell ( a bit hard )....aud/jpy, cad/jpy, nzd/jpy etc.....

Any thoughts as to why those pairs weakening, on bad US news?

THX
Fxj

Originally Posted by ;

Thx Warper...

I discovered today that ALL Yen pairs dropped ( somewhat hard )....aud/jpy, cad/jpy, nzd/jpy etc.....

Any thoughts as to why these pairs weakening, on poor US news?

THX
Fxj

Hi FxJarhead!

IMHOI feel that all the high yielders are a proxy for desire risk. After the market is searching for high returns on their investments, the risky carry trade is the tendency. When volitility and a flight to security happens, the yen strengthens as investors dump the carry, the Dow drops and treasury notes strengthen. Dollars were thrown with U/J market away and we saw a strengthening of sterling and euro (haven't looked in the other currencies today), however, the profit was smaller than what could have been expected because dollars nevertheless needed to be repatriated due to the synthetic crosses. To sum up in ultra simplistic terms: The markets flew from risk (potential loss of capital/profit) and are believing security (profit protecting currency movement ).

Additionally, we must keep in mind that loans have been taken out from the country w/the lower interest rate to make investments in the other country w/the higher yielding currency (real estate, stocks, bonds, etc.). The yen loans need to be paid back and the risk to this egy is that the yen will value in the point at which the loan was taken. If the appreciation is a lot of, compared to curiosity or profit from devices can be wiped out. So, since the yen strengthens because of the dollar weakness, the retun on investment in AUD, CAD, NZD get contested and individuals become fearful of losing money. I believe we often forget how the carry functions and wonder why people flee so quickly by them w/market hiccups.

Hope you have a great weekend!

Originally Posted by ;

Thx Warper...

I noticed today that ALL Yen pairs dropped ( somewhat hard )....aud/jpy, cad/jpy, nzd/jpy etc.....

Any ideas as to why those pairs weakening, on bad US news?

THX
Fxj

Fxj - I'd presume it's mostly to do with the consequence of relative speculative flows from the numerous countries getting pulled from the US, particularly in light of the US trade deficit with each. Genrally that the US runs a trade deficit with most major countries - that interrupts the dollar relative to other currencies, in the absence of flow investment. That investment hasn't been big enough to strengthen the dollar, except in the case of Japan, which in turn implies the insecure investment flow from Japan to the US is much larger (relative to commerce ) than for other countries. And because it's speculative, long term, it may leave much faster.
Now a sizable foreign investor pulling money out of a market (given news that will give rise to a market fall ) and repatriating funds (assuming the news will also drop the value of the market's county) quickly needs to do 2 things - sell the inventory, and establish a currency exchange to get the best possible price so that if the collateral transactions clear he can utilize the proceeds to pay the ccy transaction (this second part in reality is more likely done by ccy speculators according to expectation of outflow requirement, but for the time being that just complies the picture)... Because Japan appears to have furnished the most significant volume of spec investment relative to trade flows, the requirement for JPY moving another way will be much stronger, than state Euro or Aud. Which in turn means the other JPY crosses sink, to some greater or lesser degree.

An intriguing aspect of the inventory sell of was that there wasn't any afternoon healing, nor was there any specific dip in the Japan crosses, which means people are willing to carry the rollover's for awhile. Next week Ought to Be entertaining

Originally Posted by ;

Sorry, whether a pip is 0.01 or 0.0001 does not make any difference .

EUR/JPY is a carry trade pair, and carry trades are generally strongly correlated with stock markets. So GBP/JPY and EUR/JPY both fell strongly after NFP.

I am sorry but once we don't understand what we're referring to, the least we can do would be to avoid bothering the others.

If someone around here paid focus on the carry trades dilemma, when it started to develop into the narrative of the year, you'd know that the sign to spot conveys calm or in other words, to spot the difference between a normal fall and also a carry unwind fall, would be to notice if EJ or GY for example are decreasing with the help of both EU and GU in the exact same moment.

The motive... as previously explained in this thread, is mainly because when the unwind is being done, the Pounds and Euros or other currencies are converted into Dollars and only then converted into Yens. Strenghtening Yen and Dollar.

Can we watched this today? No...

We only saw dollar market in most of pairs. If GU and EU did not climbed as anticipated is speculation blaming somekind because there were still another reasons for that increase of unwinding.


1- A component of terrible news to come were already priced in, the increase today was the remaining traders who were waiting.

Two - Technically the pairs were overbought at the time of the NFP.



But regarding the conveys subject, it is the USD/JPY who hasn't only chart correlation but physical correlation also with their stock market, since US stock traders borrow yen to buy dollars and then shares, not euros and pounds.

A couple of days ago we'd see EU and GU decreasing with US terrible news and rising with US good news. That's a indication of unwind.

Today it was the first time in the last month it didnt occurred because traders noticed the DOW recovered the losses of august and the currencys did not, so today we saw a detach from EU and GU against the shares, or in other words,... lets get back to normal...

The rationale there were unwind of EJ and GY in august was due to the nature of the issue. Credit and subprime crunch afecting European stocks also. But NFP..., if they weren't able to create jobs, why Europe should care at this point?

Conclusion...

UJ is the Person Who beneficiates from US stocks/treasuries buying.

If it drops or rises, it will have impact on the others due to the multipliion variable, since EU and GU can't compensate with the exact same volatibility considering the real number.

Good example...

Imagine UJ together with 115 and GU with 2.0100. GY will possess 231.15 at that moment.

Minutes after UJ drops 10 pips to 114.90 but GU rises 10 pips to 2.0110

GY fell to 231.06...! In revision both pairs rised and dropped an equal ammount of pips but the result is a fall of 9 pips on GY.

Is it hard to recognize it was the decreasing pair that caused the 9 pip fall?




There's a good way of convincing yourselfs of the.

Setup a UJ EJ EU charts or UJ GU GY, and Dow and SP 500 futures.

And wait for a collapse or a new like today.

You will notice that it is UJ who obeys into the shares in the first location.

You will notice that when UJ rejects a price in resistance of support, the others stall without a specific obstacles arround, or you will notice like today that UJ had been droping and the others were droping in a slower speed.

Just when GU stopped to rise permitted to GY shed more fast.

This means is that GY was not droping by itself, was droping as a multipliion variable caused by UJ and GU. Being UJ the sole pair of both falling, therefore, no real unwind, just USD sell. Regular sell.



An important thing to notice is this...

At the end of the day even in different days, you might observe that EJ and GY are stopped in somekind of specific barrier, but this is only due to the remainder of specialized traders ajusting the pair in the last shoots.

Thats why I ask you to put up that charts and look at them LIVE, to notice who obeys who.



... to get FxJarhead who asked this, the others pairs will fall on US awful news on everytime GU and EU can't override or overcome the UJ drop. But if we don't observe the real currency market, we understand the true about the fall.

How can we see if the most important currency is weaking or maybe not? In the trader pair of that currency. Euro case... EU.

Here is a good logic...

Imagine a machine which could throw a rock at a 100 meters space for each watt added.

A second machine which may throw more 200 meter space for each watt added.

And a third one which employs the engine of the other two combined to create his own throw. What occurs with the closing throw if we decrease watts on the next one and insert watts.

The throw of the last machine increases or declines?

Decreases Due to the fault of the first engine? Or in this case is it a fault of the Euro? No...

Hope this clarified. If not, hey I honor the individuals who disagree.




PS: I am studying some new articles and I am noticing clear mix/shuffle involving everything.

Yes there are flows... and Market correlation... but again... today was not the case.

Here is a proof.

This might seem contraditory but take a peek at the weekly charts of UJ throughout the US recession in 2002. And take a peek at the weekly charts of EJ in that year?

What do people find? We see EJ and UJ droping like a rock remaining.

Why? Where were the flows back afterward?

The motive is at EU that climbed about 1600 pips in 3 months assisting EJ to remain . When was the last time we found that type of energy from Euro? So, conclusion? US had problems back then but EJ stayed and there weren't unwinds.

So... if we're in the exact same place like back then, reason EJ dropped isn't because of the mindless unwind. Its just because Euro does not have performances like back then to help the UJ fall is overcome by EJ we see UJ droping is easy to presume that the others will follow, dependent on each pair functionality.

UJ droped in July but GY was climbing? Why? Because GU was a monster in those days. (1000 pip run)

Again... in somedays, its all about pairs volatility.